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<keyword id="465710" type="ORGANIZATION" weightage="20" keywordseo="Cognizant-Technology-Solutions-Corporation">Cognizant Technology Solutions Corporation</keyword> (CTS) has recently announced an internal investigation under the <a href="http://www.businessinsider.in/searchresult.cms?query=bribe&amp;sortorder=score">US Foreign Corrupt Practices Act</a> into certain payments made to facilities in India. 
 
The probe led the company to appoint its IT Services Chief Executive <a href="http://www.businessinsider.in/searchresult.cms?query=bribe&amp;sortorder=score">Rajeev Mehta</a> on September 28 as its President, a day after incumbent <keyword id="333490" type="PERSON" weightage="20" keywordseo="Gordon-Coburn">Gordon Coburn</keyword> resigned on September 27. 
 "The investigation is being conducted under the oversight of the audit committee and is focused on a small number of company-owned facilities," <keyword id="28721" type="CITY" weightage="100" keywordseo="Cognizant">Cognizant</keyword> said in a regulatory filing with the <a href="http://www.businessinsider.in/searchresult.cms?query=bribe&amp;sortorder=score">US Securities and Exchange Commission </a>(<keyword id="6362470" type="ORGANIZATION" weightage="20" keywordseo="SEC">SEC</keyword>). 
 The company has notified the <keyword id="99225" type="ORGANIZATION" weightage="20" keywordseo="Justice-Department">Justice Department</keyword> and the SEC and is cooperating with both agencies. 
 
"The internal investigation is in its early stages, and the company is not able to predict what, if any, action may be taken by the Justice Department, SEC or any governmental authority in connection with the investigation or the effect of the matter on the company's results, cash flows or financial position," it said in the filing. 
 <keyword id="6371425" type="PERSON" weightage="20" keywordseo="Mehta">Mehta</keyword>, 49, who has been with the company since 1997, was Chief Executive of its IT Services since December 2013. 
 
"For the past decade, Mehta has been responsible for leading our market-facing teams in delivering industry-leading growth. He has a deep understanding of new technologies and new delivery models and their potential to transform businesses," said Cognizant Chief Executive Officer Francisco D'Souza in a statement. 
 
As Chief Executive of IT Services, Mehta was responsible for market-facing activities across the company. His prior roles include Group Chief Executive, Industries &amp; Markets, where he led its industry vertical and geographic market operations on a global basis. 
 
"I am honoured to assume this new role at an exciting time in Cognizant's history. Over the past year, we have designed and introduced a new operating model to support our strategic vision and growth," said Mehta in the statement. 
 Co-founded by Indian-origin Kumar <keyword id="83718" type="COMPANY" weightage="20" keywordseo="Mahadeva">Mahadeva</keyword> and D'Souza two decades ago, the Nasdaq listed $12.4-billion IT major has its largest software development centres in Chennai, <keyword id="6354321" type="CITY" weightage="20" keywordseo="Bengaluru">Bengaluru</keyword> and Hyderabad. 
 In its previous avatar, the company was an IT arm of <keyword id="3707146" type="COMPANY" weightage="20" keywordseo="dun-bradstreet-satyam-software">Dun &amp; Bradstreet Satyam Software</keyword> in <a href="http://www.businessinsider.in/searchresult.cms?query=bribe&amp;sortorder=score">Chennai </a>and was spun off as <keyword id="3707150" type="ORGANIZATION" weightage="20" keywordseo="cognizant-corporation">Cognizant Corporation</keyword> in 1996 after it bought 24 per cent equity stake of <keyword id="10958" type="CITY" weightage="20" keywordseo="Satyam">Satyam</keyword> for $3.4 million. Its headquarters was shifted to the US in 1997. 
 
With about 100 development and delivery centres worldwide and 244,300 employees, Cognizant is ranked among the top performing and fastest growing firms globally.

Cognizant is probing unlawful payments in its India operation

For the first time in 14 years, US-based <a href="http://www.businessinsider.in/searchresult.cms?query=cognizant&amp;sortorder=effectivedate">Cognizant Technology Solutions</a> could not beat <a href="http://www.businessinsider.in/searchresult.cms?query=infosys&amp;sortorder=effectivedate">Infosys</a> and posted its slowest quarterly revenue growth. 
 <keyword id="28721" type="CITY" weightage="40" keywordseo="Cognizant">Cognizant</keyword> also cut the upper end of their full-year revenue guidance and forecasted revenues in the range of $13.65 billion to $14 billion. 
 
For the March quarter, Cognizant registered a net profit of $441.2 million, compared to $382.9 million in the year-ago period. 
 
For the June quarter, the company forecast revenues in the range of $3.34 billion to $3.40 billion. 
 
New Jersey-based Cognizant Teaneck said that it was hurt by slow spending from top healthcare customers. 
 
"As anticipated, during the first quarter we saw softness in our healthcare segment due to M&amp;A activity, as well as softness in our banking segment due to financial market volatility," said Gordon Coburn, president at Cognizant, adding, “As we move into the second quarter, we are quite pleased with our momentum with new and existing clients, which we expect to drive sequential revenue growth in the second quarter of $140 to $200 million.” 
 Meanwhile, Cognizant also failed to trump <keyword id="6354512" type="CITY" weightage="20" keywordseo="Infosys">Infosys</keyword> in growth rates for the first time since 2002-03, indicating that under <a href="http://www.businessinsider.in/searchresult.cms?query=vishal+sikka&amp;sortorder=effectivedate">Vishal Sikka</a>, Infosys is on track.

First time in 14 yrs, Cognizant posts slowest quarter due to volatile markets, slow spending

CHENNAI: The Teaneck, New Jersey-based <keyword id="28721" type="CITY" weightage="20" keywordseo="Cognizant">Cognizant</keyword> on Wednesday said its quarterly revenues for April-June period rose to $2.52 billion, in line with <keyword id="108560" type="POSITION" weightage="20" keywordseo="Analyst">analyst</keyword> expectations, up 16.5% from a year-ago period and 3.9% sequentially, joining the $10 billion a year run-rate club. GAAP net income was up 23.8% at $372 million and 6.6% sequentially. The company lowered its guidance for the remaining period, sending its stock prices crashing. 
 Cognizant, which employs more than three-fourths of its employees in India, said its growth could slow down than previous forecast due to weakness at some clients and delays in order booking. Cognizant shares fell 16% to $42.19 in <keyword id="6357328" type="COMPANY" weightage="20" keywordseo="NASDAQ">NASDAQ</keyword> in early trades, after declining as much as 17% for the biggest intra-day drop since May 2012. The stock had declined 1% this year through Tuesday. "Clients aren't spending as much as we expected on projects as we were anticipating," Gordon Coburn, president of Cognizant, said on the second-quarter earnings <keyword id="105062" type="EVENT" weightage="20" keywordseo="Conference-Call">conference call</keyword>. 
 
The company cut its revenue growth forecast for the year to at least 14% from earlier 16.5%, slowest ever in its 20 year history. Its latest full-year guidance could result in revenues of at least $10.1 billion, achieving a significant milestone. Analysts were expecting full-year revenue of $10.34 billion, according to Thomson Reuters. Cognizant also forecast July-September quarter revenues to range between $2.55 billion and $2.58 billion, again lower than analyst estimates of nearly $2.66 billion. 
 "Due to weakness at certain clients and longer than anticipated sales cycles for certain large integrated deals, we are adopting a more conservative stance for the remainder of the year," Francisco D'Souza, <keyword id="5645" type="POSITION" weightage="20" keywordseo="CEO">CEO</keyword> of Cognizant, said in a statement. 
 
It said that it has signed three transformational engagements totalling $3.5 billion in contract value, including a letter of intent with Health Net for a seven-year deal. The deal is expected to represent approximately $2.7 billion in total contract value, the largest in Cognizant's history, a company statement said. 
 
Operating margins were at 21%, higher than the company's targeted 19-20% range. This, however, lags its comparable Indian peers who have higher operating margins. For example: TCS's margins are 26.1% while that of Infosys are 25.1%. Revenues from North America rose 15%, accounting for about 77% of all revenues. The EU region contributed to 20.4% of revenues. 
 
Consulting and technology services contributed to 52% of revenues and grew 6.2% sequentially while outsourcing services 48% of revenues and grew 1.5% sequentially. "As expected, overall pricing was stable during the quarter, said Karen McLoughlin, CFO, Cognizant 
 
The company said it added 8800 persons (net), its highest since Q3 2011, in a quarter where its comparable peers recruited fewer people. "Around 34% of gross additions for the quarter were direct college hires, while 64% were lateral hires of experienced professionals. We ended the quarter with approximately 187,400 employees globally. Annualized attrition levels at Cognizant was 16.9% during the quarter-including BPO and trainees-down by almost 200 basis points from the year ago period. 
 
Cognizant also said it expanded its stock repurchase programme from $1.5 billion to $2 billion.

Cognizant Marches Into $10 Billion Revenue Club

House Republicans aren't the only people rooting for the death of the Senate immigration bill. Ten thousand miles away, almost the entire Indian subcontinent is cheering on the bill's demise.
That’s because a coalition of domestic high-tech companies and pro-labor Democrats has twisted the worthy goal of knocking down America’s barriers to technical foreign talent into blatant protectionism.
Companies like <keyword id="10875" type="CITY" weightage="60" keywordseo="IBM">IBM</keyword> and <keyword id="6370971" type="CITY" weightage="60" keywordseo="Accenture">Accenture</keyword> have managed to rewrite the H-1B visa program so as to allow themselves to add foreign workers to their U.S. payrolls while forcing Indian companies in the U.S. to subtract Indian workers from theirs.
Not only is this unfair but it sends the dispiriting message that America is not interested in abiding by the rules of free trade that it preaches to the rest of the world.
The Senate bill would raise the cap on high-skilled H-1B visas from 85,000 to potentially 185,000. But without naming them, it targets four companies—Tata Consulting Services, Wipro, <keyword id="6354512" type="CITY" weightage="60" keywordseo="Infosys">Infosys</keyword> and Cognizant—and bars them from taking advantage of the extra visas. (All are India-based except Cognizant, which is headquartered in New Jersey but was founded by an Indian.)
All four have a majority of their U.S. workers on H-1Bs or the equivalent. But the proposed visa rules would bar any 50-employee strong company with over 50% of its U.S. workforce on H-1Bs from applying for any more visas after 2016. In the interim, they will have to pay up to $15,000 in visa fees for every additional applicant compared to the $5,000 for other companies.
Even worse is the so-called outplacement restriction that would bar these companies from placing their H-1B workers on client sites in America, rather than having them work in-house.
Why are these companies being targeted for such outrageous treatment? Allegedly, because they are abusing the high-tech visa program to replace American workers with cheaper Indian workers.
“Americans would be shocked to know that the H-1B visas are not going to Microsoft; they’re going to these firms, largely in <keyword id="3658" type="COUNTRY" weightage="60" keywordseo="India">India</keyword>, who are finding workers, engineers, who will work at low wages in the US for three years,” fumes Sen. Dick Durbin (D-Ill.) who, along with Sen. Chuck Schumer (D-N.Y.), championed these restrictions.
Cognizant President Gordon Coburn allows that such allegations might apply to “body shops” or employment agencies that rent out H-1B workers on a contractual basis so that American companies don't have to hire permanent staff. But that’s not what Cognizant or the others do.
They offer not workers but services, insists Coburn. These services include IT support or computer programming for non-core business functions such as payroll processing, tracking employee records, data analysis. And the supply chain for these services spans the globe.
For example, Indians have developed an unparalleled expertise in writing glitch-free software for old mainframe systems that American companies need to maintain as they transition to more cutting-edge web-based technologies, notes Vivek Wadhwa, Vice President at Singularity University.
This is partly because it was not cost-effective for American companies to deploy software engineers drawing top dollars for basic programming. So companies like Infosys have created entire campuses in India to train young graduates to fill this programming niche, among other things.
But these companies also need some portion of their staff on-site in the U.S. to understand the systems and specifications of their American clients, which is why they are heavy H-1B users. In fact, their clients—which include 480 of Fortune 500 companies—often contractually require them to place employees on site to troubleshoot.
The outplacement restriction deals a body blow to this whole business model. “It basically tells us not to do business in America,” says Som Mittal, President of India’s National Association of Software and Service Companies.
Durbin and Schumer maintain that these visa restrictions will force American companies to invest more in American talent and raise American wages. But good programmers already command up to $200,000 in wages, notes Wadhwa. Raising these salaries further will only prompt American companies to offshore their whole operations.
Microsoft supports these restrictions for the simple reason that in a world of finite visas, fewer visas for Indian companies means more for itself. But IBM and Accenture have even more insidious motives.
Both companies have been expanding their IT operations in India and are directly competing with Indian companies for American “offshore” business. IBM now generates about a third of its revenues in India where it employs over 100,000 people. The visa restrictions are simply an effort to cripple their foreign competitors and capture their offshore market share, something that won’t save a single American job.
None other than Ronil Hira, a professor at the Rochester Institute of Technology, whose work was instrumental in triggering the jihad against alleged visa abuse, pointed this out during his Congressional testimony. Because IBM and Accenture have a large American workforce, they will be able to hire even more H-1Bs than the Indian companies without running afoul of the new visa regime.
“Therefore, we will simply see the outsourcing shift from a company like Cognizant, which will face restrictions, to an Accenture, which will not,” he noted.
The Indian government is working behind the scenes to kill these discriminatory measures. Its effort now will be to replace the Senate provisions with a much cleaner H-1B bill proposed by Republican Congressman Darrell Issa that has already passed House Judiciary Committee.
If this effort fails, backlash would be inevitable. Infosys, TCS and Wipro are a pillar of India’s $100 billion IT industry and a source of national pride. Watching them be mistreated after they have worked hard and played by the rules is already igniting calls for retaliation, including giving Indian companies preferential access to government contracts over IBM and other American companies.
How ironic it would be if <keyword id="124780" type="UNKNOWN" weightage="60" keywordseo="immigration-reform">immigration reform</keyword> that was meant to knock down America’s existing walls to foreign talent ends up erecting new walls against American business abroad. Protectionism has a way of backfiring. Both Durbin and IBM should bear that in mind.
Shikha Dalmia is a Reason Foundation Senior Analyst and a Reason magazine columnist.

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